By Sarah E.J. Collier, JD
Do you plan on owing Uncle Sam this 2020 tax year? How do you plan on paying? By check? If so, you may want to reconsider your options for this year.
In past years it has been very typical for taxpayers to have their Federal (and State) refunds direct deposited into their account and pay taxes owed by mailing a check with the accompanied coupon. Unfortunately, the impact of COVID-19 still lingers into the 2021 year with a fragile workforce still susceptible to COVID-19 quarantine orders and reported unprecedented longer postal mailing times. Therefore, mailing a check for the amount of income tax owed might take longer than expected to be received and processed by the Federal (or state) agency. Therefore, you may want to consider other options, including various electronic forms, of paying your Federal income taxes.
Mail a Check, Money Order or Cashier’s Check
As mentioned earlier, this method of making a payment is very common. These methods are easily trackable, so you can verify receipt. However, this method does require mailing the check along with the voucher which could cause a delay in being received and processed. Money orders have a limit of $1,000 and both cashier’s checks and money orders could have a fee for a bank to issue.
For more information on how to submit your payment via check, money order or cashier’s check, follow the link: https://www.irs.gov/payments/pay-by-check-or-money-order
Federal Fund Wire Transfer
The IRS does accept same-day federal fund wire tax payments. However, you will want to contact your financial institution to see if they can do the transfer, what fees they charge and when transfers need to be made by. For this option, you will need to complete the Same-Day Taxpayer Worksheet. For more information follow this link: https://www.irs.gov/payments/same-day-wire-federal-tax-payments.
Pay in Person at your Local IRS Office
There has been increased concerns with account hacking and fraud scams in recent years. As a result, paying directly at your local IRS office might be a safe and secure option. For this option, you will need to make an appointment with your local IRS Office. Unfortunately, scheduling an appointment in time to meet the deadline might be challenging and you may need to look into other options to make your payment. Follow the link to locate your local office and schedule an appointment. https://www.irs.gov/help/contact-my-local-office-in-new-york
Electronic Funds Withdrawal when e-Filing, select this option on your tax return
This is a very convenient, safe and secure option if you e-file your tax return using a tax preparation software or hired tax professional. Opting into having an electronic funds withdrawal allows you to e-file and e-pay in one step. The IRS does not charge a fee for this transaction, although you will want to consult your financial institution before proceeding with the payment. There is some control over when payment is sent, either at the time of e-file or other scheduled day before the due date. The scheduled payment can be canceled up to 8:00 pm Eastern Time two business days before the scheduled payment date).
Pay Online-IRS Direct Pay
By utilizing the IRS Direct Pay, you have more flexibility when making a payment. These payments can be made directly on their website at https://www.irs.gov/payments. There, you can opt to make an ACH payment, debit card or credit card. Many of these processors accept a number of different payments such as Visa, Master Card and even PayPal! From here you can track your payment and ensure payment is processed.
For those that like to plan ahead, the IRS Direct pay allows you to be more selective on when the payment is made. You can schedule payments, make same-day payments (a saving grace for us procrastinators) and change/cancel scheduled payments up till two days before the payment date. However credit card transactions cannot generally be canceled. As proof of payment you will receive a confirmation number and a receipt taking two business days to process.
When making a non-ACH payment, the transaction may be subject to additional fees. The IRS uses outside services to process these payments each with their own separate set of fees. (Follow the link for information on these different processors and their fee schedule https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card.)
Pay on The IRS’s Official Mobile App-IRS2Go
This payment option is the mobile version of the IRS Direct Pay. Once downloaded, you can make an ACH or non-ACH payment similar to the IRS Direct Pay-subject to the processor fees. For more information on IRS2Go and to download the app, follow the link https://www.irs.gov/newsroom/irs2goapp.
Pay Online-The Electronic Federal Tax Payment System
This is a great option if you want the convenience of having control over your payments like the IRS Direct pay but want the added security. You will have the ability to make payments online or over the phone, schedule payments and make same-day payments. These schedule payments can also be changed or canceled until two days before the scheduled payment date. To opt into this option, you will need to go to the IRS EFTPS website at: https://www.irs.gov/payments/eftps-the-electronic-federal-tax-payment-system.
Unfortunately, with the added security features the process to set up your account takes some time. Once the account is set up through the IRS EFTPS website, it takes about a week (under normal postal mail operating times) to receive your PIN needed to schedule transactions. Actual postal mailing time might take longer as mentioned earlier. Therefore, if you would like to opt into making an IRS EFTPS payment, you will want to plan in advanced. Also, you may incur a fee through your bank if they initiate the payment instead of you scheduling the payment online or over the phone.
It is generally advised to not make this payment in cash because of the concern of tracking the payment made if there is a discrepancy in the future. The IRS especially strongly advises against mailing in cash. If cash is the only option for you, please follow these links for more information.
Paying Your Taxes With Cash: https://www.irs.gov/payments/pay-your-taxes-with-cash
What to Expect When You Pay Cash at an IRS Office: https://www.irs.gov/payments/what-to-expect-when-you-pay-cash-at-an-irs-office
Timing and precision is everything when making sure your payment is received and processed in time by the IRS’s deadline. If you have any questions about which method you should use, please contact your tax professional or financial advisor.